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Tax-friendly infra bond limit may rise to Rs 100,000

The government is likely to announce a fresh set of tax exemptions to trigger investments in large infrastructure projects, Anupama Airy reports. Road to prosperity

business Updated: Feb 06, 2012 00:42 IST
Anupama Airy & Gaurav Choudhury
Anupama Airy & Gaurav Choudhury
Hindustan Times

The government is likely to announce a fresh set of tax exemptions to trigger investments in large infrastructure projects. This could include raising the limit for claiming tax rebates from infrastructure bonds to Rs 100,000 per annum from the current Rs 20,000 for every individual.

"Enhancing the investment limit in infrastructure bonds to Rs 100,000 per annum would attract more retail investors as the current cap of Rs 20,000 is inadequate to attract high net worth individuals," an official, who did not wish to be identified, said.

The government may also offer tax exemption up to Rs 1,000 crore to corporations who invest in infrastructure bonds and is also considering to allow public sector undertakings (PSUs) to invest in such bonds.

"Tax deduction to corporates who invest in listed debt instruments offered by infrastructure companies, banks and infrastructure special purpose vehicles is under active consideration," said the official.

The move is aimed at channelising household and corporate savings in to the cash-starved sector. An estimated $1 trillion (about Rs 50-lakh crore) would be required to fund India's infrastructure projects during the 12th plan period (2012-2017).

Infrastructure companies will have to raise about half of these funds as debt through bonds.

At present, individuals can claim tax exemption up to Rs 20,000 for investing in long-term bonds of infrastructure companies such as National Highways Authority of India.

These are over and above the deductions that individuals can claim under Section 80C up to a ceiling of Rs 100,000 for which they can choose among a host of savings instruments such as mutual funds, public provident fund and insurance premium to spread out their tax planning investments.

The high-level committee on financing infrastructure headed by former Reserve Bank of India deputy governor Rakesh Mohan, which met last month, has also put forward similar suggestions to ensure that a strong bond market can flourish among other instruments and household savings can also be tapped effectively.